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Prof. Suzanne Scotchmer Examines the Scarcity of Ideas in the 17th Barcelona Economics Lecture

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The Barcelona GSE Research Network and Banc Sabadell presented the 17th Barcelona Economics Lecture on Tuesday, November 10 at the Banc Sabadell Auditorium. Professor Suzanne Scotchmer (UC Berkeley) discussed "The Scarcity of Ideas: Use It, Lose It, or Bank It" before an audience of GSE affiliated professors, researchers, and students. The lecture series regularly brings internationally influential speakers to speak to the Barcelona GSE community. Last year's lecturers included Jean Claude Trichet (ECB), Hugo Sonnenschein (U Chicago), Robert Barro (Harvard) and Esther Duflo (MIT).

Prof. Scotchmer's lecture was broadcast live via streaming web video on the GSE's website, enabling the public in the city and around the world to follow the lecture and subsequent discussion in real time. The full lecture will be available shortly on the Barcelona GSE research community video page.

Interview with Prof. Scotchmer:
Economic debate in Barcelona, "an imaginitive and innovative economy"

Following her lecture, Prof. Scotchmer granted a brief interview in which she commented further on her theory of innovation, and also spoke about the economics research going on in Barcelona.

"Barcelona is one of the world capitals in the economic debate," Prof. Scotchmer said. "It has highly trained economists and is an ideal platform for discussing the issues that most concern us as specialists."

Has the time come to change the economic model?

My principle of innovation is not radical at all. It is simply a case of adapting to a new social reality. It is not the first time that the economy is innovating (it did it at the end of the great world wars), but today we need to get motivated and find out where we stand.

Let´s get working…

As I stated in my speech, the managers of the economy must encompass the entire social fabric and offer good opportunities, resources, to the ideas that have a clear impact on society. We need to be imaginative and not always go around in circles over the same things. Barcelona, I insist, is a good example of an imaginative and innovative economy.

But the laws of the market are very conservative.

That is their sin. The keys of economic growth of the XXI century are not those of the XX century. The old idea of accumulating dividends is probably not the right one just now.

Your CV points out that you are also a specialist in games. Intellectual gambling?

[laughs] My interest in the game is purely scientific ... There is a mathematical theory called game theory. In fact, this was one of the strategies of innovation that the U.S. economy raised in the 50s; this is a strategy of military character based on the calculations of probabilities and an implicit knowledge of the adversary, the customer, the consumer society. From game theory, economists have become interested in social behavior and consumer patterns, and adapt the economy to this new reality.

It's no surprise that the Nobel Prize in Economics has been awarded to a psychologist or two…

We need more involvement of psychologists in our work; innovation requires it. The ideas of incentives and competition that we inherited from previous economic models may no longer serve us, we must adapt to how people think and what people do.

Another strength of your resume is intellectual property management. What do we do about internet piracy?

In the eighteenth century, if you wanted to pirate you needed a ship, a crew and many weapons. Now you can hack with a computer connected to the network, so even a child can do it. We are therefore confronted with a behavior that is very difficult to repress or control. In my view, we must rethink the protection of intellectual property rights differently. He who writes a book, releases a song or a movie, should pay tribute to those who wrote, composed or made them before him, and from whom, at least, he learned from. It would make sense that a kind of royalty, however, should be fair and sustainable, both for those who draw something new and for those aspiring to capitalize on what has already been released.

Eric Maskin has argued against charging royalties towards computer software.

I know Professor Maskin and I know what he meant. Technology patents follow a much more fair and orderly pattern. When you invent something new, you do it based on patented elements and therefore, you must share your profit with the other inventors. Intellectual property is more complicated. If you have to pay all those that are related to what you will get, it may mean that to create may be too expensive. One would have to find a form of sustainable monopoly in an industrial context like the present one.

Any ideas?

If the new creator owes nothing to the old one, he is relieved of a hefty payment and he can have better opportunities to create; but the tide changes when its creation becomes public domain and can be used freely without him getting anything in return. It is about losing and also winning, or of not losing or winning anything. I have the feeling that people opt for the first one and that the basis for an equitable distribution have to be set.

If we innovate, it means that in Europe, United State or Japan innovative ideas exist that are different to those of the emerging economies like China.

Indeed. My observations on innovation are confined to the Western economic sphere. It is obvious that in France there are some innovative approaches that are different from my country, but the differences are not as great as between the two countries and China.

Is it innovative to open a ‘one dollar shop’ in Senegal?

The Chinese economic interests in Africa go far beyond pure business. It is an economic colonialism that the West take as being ‘out of date’ (in the third world there is no market for western prices) and which offers the giant Asian a historic opportunity without equal. We will have to wait and see, because right now there is neither political stability nor the social order to think of an African market. The social needs of Africa are, for now, more related to survival than trade speculation. China faces a very complicated challenge.

Interview conducted by Jordi Montaner for Barcelona GSE and Global Talent

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Video: "The Scarcity of Ideas"

Prof. Suzanne Scotchmer

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